On The Strength Of iPhone 7, Brean Lifts Apple's Price Target To $135

Apple Inc.'s AAPL investors are likely doubting the company's short- and long-term outlook after the company's earnings report given the 3 percent decline in the stock early Wednesday morning.

Ananda Baruah of Brean Capital isn't among those who are concerned as the analyst reiterated a Buy rating on Apple's stock with a price target raised to $135 from a previous $125.

Related Link: Don't Be Surprised By Apple's Pullback

Baruah's bullish stance stems from Apple's outlook for its December quarter. Specifically, the company's guidance implies not only further strength in iPhone shipments, but a greater than expected shift mix to the 7-Plus model. In total, Apple could ship 78 million to 80 million iPhone units in the December ending quarter.

The analyst added that Apple's momentum is expected to continue into the March-ending quarter and expects total iPhone shipments to be around 55 million with a similar favorable mix towards the 7-Plus model, which will boost the overall average selling price and gross margin.

Bottom line, given Apple's incremental momentum, the analyst felt it necessary to boost his price target to $135 which implies a 13.5x P/E multiple (which is above the stock's median multiple of 12.5x) on his 2018 earnings per share estimate of $10.00.